Procedure When a Deal Falls Through

Deal Falls Through, Lack of Financing


The Buyer’s agent indicated in a telephone conversation that the Buyer isn’t able to secure his financing by the end of the conditional period. What happens, if nothing is said at all etc?


The Seller can move to the second Buyer as long as the first deal is finished. That’s not entirely clear here. He missed the deadline. Actually, that means nothing. There is no consequence associated with that. 

The Seller is then placed to a choice: 

1) accept the breach and extend the conditional period, or

2) Terminate and move on.

When it comes to termination, either a Mutual Release or a notice of termination will work. The problem here is that “conversations” can be misinterpreted. You have to be clear about the route that is being selected by the Seller. The reference to a mutual release in a text can be interpreted as a notice of termination. A Mutual Release doesn’t even have to be signed to accomplish its purpose, that is, as a notice of termination. The intent is still quite clear, this deal is over!

The risk of continued conversation after the condition expiry is the possible interpretation of a waiver of the “time of the essence” provision in the Agreement.

There’s a method which will avoid problems, and, that is, following the “termination protocol”.

The outstanding issue is whether the Buyer’s agent believed that the time period expired and that he had been granted a short extension. That could be express or implied. Here, it’s obvious that it wasn’t express, so was it provided in the context by implication?

That’s a huge risk if there was no documentation one way or the other. Paperwork will be key! So, get something signed!

Brian Madigan LL.B., Broker

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